Gold Sees Mild Corrective Pullback Following Tuesday's Big Gains

New York (Dec 10) Gold ended the U.S. day session modestly lower Wednesday, on a mild downside correction following sharp gains Tuesday that pushed prices to a six-week high. Today’s price action is still impressive from the bulls’ perspective. February Comex gold was last down $0.90 at $1,231.40 an ounce. Spot gold was last down $0.50 at $1,232.50. March Comex silver last traded up $0.056 at $17.19 an ounce.

Crude oil prices were sharply lower and hit new five-year lows Wednesday. That was a bearish “outside market” force that also somewhat limited buying interest in gold and silver. It’s understood by most that rising U.S. crude oil production is a main factor in the recent slide in world oil prices. What may be less obvious to many is that while not only is the higher U.S. production adding to world oil supplies, but at the same time the rising U.S. oil production has knocked most, if not all, of the “war premium” out of the price of a barrel of crude oil. This is very significant. Just five years ago it could be argued the price of a barrel of crude included a war premium of anywhere from 10% to 25% of its price. The war premium had nothing to do with actual supply and demand, but was an added value to the price of a barrel of crude based upon worries of potential serious military conflict in the oil-rich and major oil exporting Middle East.

The German government auctioned two-year notes (Schatz) Wednesday for an average yield of minus 0.04%. The negative yields on recent German bond auctions underscore the ill health of the European Union economy. Germany is considered the safest haven of the EU countries. Central bank watchers can make an argument that it could be hard for the U.S. Federal Reserve to begin raising its interest rates when the European Union is on the verge of falling over the cliff into deflation—and when the European Central Bank has embarked upon more quantitative easing of its monetary policy.

In other news, China’s consumer price index rose by 1.4% in November, year-on-year, following a 1.6% increase in October.

The London P.M. gold fix was $1,229.00 versus the previous London A.M. fixing of $1,228.25.

Technically, February gold futures prices closed near mid-range on a mild corrective pullback from Tuesday’s big gains that saw prices hit a six-week high. Price action Tuesday produced a bullish upside “breakout” from the recent choppy trading range and the bulls have gained upside momentum to suggest a near-term market low, and possibly a major market low, may now be in place. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at the October high of $1,256.20. Bears' next near-term downside price breakout objective is closing prices below solid technical support at $1,200.00. First resistance is seen at Tuesday’s high of $1,239.00 and then at $1,250.00. First support is seen at today’s low of $1,225.30 and then at $1,221.00. Wyckoff’s Market Rating: 4.0

March silver futures prices closed near mid-range and hit another six-week high today. Prices on Tuesday also scored a big and bullish upside “breakout” from the recent choppy and sideways trading range, to begin to suggest a near-term, if not a major, market low is in place. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at the October high of $17.825 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at this week’s low of $16.165. First resistance is seen at today’s high of $17.355 and then at $17.50. Next support is seen at $17.00 and then at $16.81. Wyckoff's Market Rating: 4.0.

March N.Y. copper closed down 325 points at 289.50 cents today. Prices closed nearer the session low. Lower crude oil prices today helped to pressure copper. A bearish pennant pattern has formed on the daily bar chart. The bears have the firm overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 300.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the contract low of 277.75 cents. First resistance is seen at today’s high of 292.70 cents and then at this week’s high of 295.05 cents. First support is seen at this week’s low of 2.8655 cents and then at 285.00 cents. Wyckoff's Market Rating: 2.5.